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Del Judge Denies $1.5M in Attorney Fees Sought for Corporate Benefit in Merger Challenge

Andre G. Bouchard.

The Delaware Chancery Court on Wednesday cited the “steadfast opposition” of three New York-based plaintiffs' firms in denying their bid to recover $1.5 million in fees for finding flaws in an unsuccessful challenge to the merger of two major furniture companies.

Chancellor Andre G. Bouchard on Wednesday credited attorneys from Wollmuth Maher & Deutsch, Wilk Auslander, and Morea Schwartz Bradham Friedman & Brown with identifying, for the first time, a series of missteps that eventually "removed a cloud hovering" over Herman Miller Inc.'s $124 million acquisition of Design Within Reach Inc. in 2014.

Although the discoveries eventually led Bouchard to fix the errors last August, the judge noted that the firms constantly fought that result and said the award would have resulted in an “inequitable windfall” that the attorneys had not earned.

"The odd aspect of plaintiffs’ application is that they seek to be rewarded for 'conferring' a benefit that they fought to prevent throughout this litigation," Bouchard wrote in a 20-page memorandum opinion. "Rather than work constructively with defendants to correct what should have been obvious to plaintiffs to be a series of technical mistakes, plaintiffs chose a path of opposition."

An attorney from Wollmuth Maher did not return a call Thursday seeking comment on the ruling. Scott Watnik, a partner with Wilk Auslander, declined to comment on the specifics of the case, but said his client "intends to vigorously appeal" both the August 2018 decision and Bouchard's ruling on the application for attorney fees.

Wilmington firms Bayard and Smith, Katzenstein & Jenkins acted as Delaware counsel for the two plaintiffs.

The fee dispute stemmed from Bouchard's decision last August denying investors Charles Almond's and Andrew Franklin's claims for breaches of fiduciary duty against Glenhill investment funds and the Design Within Reach board for approving the deal, which included defective stock issuances and stock splits that diluted shares held by the company's stockholders at the time.

In the ruling, Bouchard found "zero evidence" that anyone involved in the merger had intended for the measures to cause the double dilution, and used a new provision of Delaware's corporate code to judicial validate the acts.

According to the opinion, Herman Miller made multiple efforts before trial to ensure the measures had their desired effect, but plaintiffs' counsel opposed them at every turn, instead pushing for them to be scrapped altogether.

Bouchard said Wednesday that while the attorneys had made a prima facie showing that they were entitled to a fee award, "equitable considerations" regarding their litigation strategy prevented him from granting it.

"Based on the factors discussed above, in particular plaintiffs’ steadfast opposition to curing all of the defective acts in order to pursue an inequitable windfall for themselves, the court declines to exercise its equitable discretion to award attorneys’ fees to plaintiffs in this case," he said.

David H. Wollmuth and Michael C. Ledley of Wollmuth Maher in New York and Peter B. Ladig of Bayard in Wilmington. Franklin is represented by Scott J. Watnik of Wilk Auslander and Thomas A. Brown of Morea Schwartz Bradham Friedman & Brown in New York and David A. Jenkins of Smith Katzenstein in Wilmington.

Glenhill is represented by Adrienne M. Ward and Brian Katz of Olshan Frome Wolosky and John B. Horgan of Ellenoff Grossman & Schole in New York and Andrew D. Cordo and F. Troupe Mickler IV of Ashby & Geddes in Wilmington.

The case is captioned Almond v. Glenhill.